Products and Services

Consumer Goods and Services, Financials


The Russian banking sector has witnessed a period of extraordinary growth since 2002. Driven by the economic (and, subsequently, consumption) boom, assets expanded more than seven-fold as Russia rapidly caught up with other emerging markets in terms of financial services penetration. The expansion in lending was fuelled firstly by the rise in savings (due to the increasing wealth) and secondly, in recent years, by the easily available and cheap wholesale funding. However, the worldwide financial crisis has had a severe impact on the Russian economy, taking its toll in terms of growth. The main area of focus is now shifting to asset quality and issues of recapitalisation. Although the Russian banking sector is fragmented in terms of the number of institutions, it is dominated by state banks which account for 45% of assets (with VTB being the largest). The crisis has spurred a massive redistribution in market shares, and is triggering the long-awaited consolidation in the sector, with state banks as well as large private banks coming out as the ultimate winners.

Companies under coverage

Bank Of Georgia, Halyk Bank, Kazkommertsbank, Nomos Bank, Bank Saint Petersburg, Bank Vozrozhdenie, Raiffeisen bank Aval, Ukrsotsbank

Retail, Real Estate, Consumer Goods

On the back of strong household consumption driven by high commodity prices and double-digit wage growth, the Russian retail industry had been expanding at a sales CAGR of about 25%. Now, though, it has entered a new phase of its development. The worsening macroeconomic conditions will hit consumption in general, and retail in particular. However, we believe that food retail will be more resilient since it is focused on basic products, while non-food retail will suffer to a greater extent. In a situation when real income is falling and the outlook on future cash flows is getting worse, people will be more cautious about their spending (especially on discretionary goods). Furthermore, the lack of credit at reasonable rates means that retailers are reviewing their approach to investments and relying on operating cash flow rather than on external financing. We also expect sector consolidation as a number of small retailers are already in difficulty.

Companies under coverage

Wimm Bill Dann, AFI Development, Etalon, LSR, Cherkizovo Group, Pharmstandard, Synergy, Rosinter, Mironivsky Khliboprodukt, Protek, X5 Retail Group, Dixy, M.Video, Magnit, Seventh Continent, O'key

TMT (Technologies, Media and Telecommunications)

Companies under coverage

Mobile TeleSystems (MTS), Rostelecom, MGTS, Vimpelcom Group (Vimpelcom), CTC Media, RBC

VTB Capital

Federation Tower West, 12, Presnenskaya emb., Moscow, 123100